Sainsbury's pension deficit is understood to have ballooned to £1billion this year as weak markets have undermined retirement schemes at major blue-chip firms.

The soaring deficit, set to be revealed in this week’s half-year results, will further highlight the damage the low value of Government bonds is wreaking on pension funds – particularly in the retail sector, which has hundreds of thousands of pension fund members.

Sainsbury’s has been hit by the reduction in yields on Government bonds – also known as gilts. In addition it has taken on the liabilities of the scheme run by retail chain Argos, which it took over in April.

Pension deficit: Sainsbury’s has been hit by the reduction in yields on Government bonds

Several City brokers have already pencilled in forecasts for the deficit at the £26 billion turnover supermarket chain – and they range from £900 million to £1.3 billion. That means the deficit may have increased more than threefold since the company last reported on it in May.

The company is expected to release the results of its three-year pension review this week alongside its half-year sales figures.

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That deficit sum will be lower than the forecast £1billion because it is based on figures from March 2015, when markets were far more stable. But even that figure is likely to show a dramatic rise.

The triennial review outcome is also the figure that Sainsbury’s will chiefly use as a base for its repayment schedule for the next three years, so the impact on profit in the short term over the next few years will be less than if it were based on the current accounting figure.

One City source said: ‘The timing has fallen quite fortunately for them, because the triennial review will be a much lower figure.

‘But the trustees will almost certainly have half an eye on what has happened since. I can’t imagine they will be blind to it.’

Sainsbury’s has injected £250million into the pension scheme since last year and a further £50million is expected to be used to help to reduce the deficit at the Argos chain.

Brokers at banks including Barclays and Deutsche Bank have highlighted the rise in the Sainsbury’s deficit in reports sent to their clients.

Row: Sir Philip Green, who owned BHS before selling it to Dominic Chappell, last week clashed with the pension regulator

The issue of pension funds has been thrown into the spotlight this year after the collapse of BHS left the retailer’s pension trustees and their pensioners facing a deficit of £571million.

Sir Philip Green, who owned BHS before selling it to thrice bankrupt Dominic Chappell less than a year before the chain collapsed, last week clashed with the pension regulator.

Green is understood to have structured a deal worth as much as £300million – about £50million short of what the pension regulator would like.

It emerged last month that Tesco’s deficit had soared from £3.2billion earlier this year to £5.9billion.

There is pressure to reduce deficits as it is feared that markets and returns on investments will remain weak. Many firms have closed final salary pension schemes to reduce future obligations.